Alistair Darling to publish blacklist of UK's biggest tax evaders

Tax cheats who deprive the exchequer of sums greater than £25,000 are to be named and shamed by the government in a crackdown on evasion to be unveiled by Alistair Darling in the budget on Wednesday.

The chancellor will announce that Revenue & Customs will publish a blacklist of individuals and companies deemed to be serious defaulters, and force small businesses to provide extra information for five years if found guilty of tax offences.

With the Treasury's finances under strain as a result of the recession, Darling believes a scheme used by Ireland since the early 1980s has the potential to raise tens of millions of pounds from those reluctant to have details of their tax offences published.

Offenders can prevent themselves being put on a blacklist by making disclosures to Revenue & Customs or by owning up to misdemeanours when they are already being investigated.

Darling has been told that Ireland's experience shows the risk of being exposed has acted as a powerful incentive for evaders to come forward. There will be safeguards to ensure minor indiscretions are not penalised but any serious evader who does not come forward will be put on the blacklist, even if they reach a deal with Revenue & Customs to ensure the case does not go to court.

Small businesses that incur penalties will be placed under tougher scrutiny for five years to ensure they have systems in place to pay the proper amount of tax.

The proposed action comes as part of an international attempt to tackle tax evasion outlined at the G20 summit in London earlier this month. The threat of a blacklist for tax havens that failed to agree to a code of conduct drawn up by the Paris-based Organisation for Economic Cooperation and Development prompted an immediate climbdown by a number of jurisdictions and the chancellor believes UK individuals and companies will also respond to the same tough approach.

Pressure on the government to tackle evasion has intensified after the sharp deterioration in the public finances caused by the recession. Darling will announce action to tackle unemployment and measures to ensure key sectors of industry spearhead economic recovery as the centrepiece of a budget heavily constrained by the biggest annual drop in output since 1945.

The chancellor will savagely downgrade his forecasts for growth this year and stress that a contraction of more than 3% in 2009 has restricted his freedom of action by pushing up the government's budget deficit to its highest ever peacetime level. But he is determined to draw a political dividing line with the Tories by sticking by his pledge to raise public spending by 1.1% a year in real terms for the post election period between 2011-14, roughly a third of the average since 1997.

Darling will insist that last November's pre-budget report provided an immediate £20bn boost to growth and that Wednesday's package is designed to provide investment for the recovery. The business secretary, Lord Mandelson, will announce plans for a more activist industrial policy next week, and the budget will include support for sectors deemed strategically important, including pharmaceuticals, aerospace, financial services, digital businesses and environmental technologies.

Darling has agreed to back a "cash-for-clunkers" scheme under which motorists will receive a £2,000 sweetener for trading in their old cars for new models.

Aware that Wednesday's package will coincide with grim unemployment figures for March, the budget will focus on help for the jobless, particularly those under 25. The Department of Work and Pensions has proposed that the flexible new deal for young people due to start in October could apply to any young person unemployed for six months or more, instead of the current proposed 12 months.

Despite the rapid descent of the UK into recession, the chancellor remains upbeat about the prospects for a recovery later this year. He will say that a combination of lower interest rates, higher government borrowing, emergency help for the banking system, lower oil prices and a weaker pound have created the conditions under which the UK can recover quickly once the prospects for the global economy brighten.